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UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

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No. 01-2361

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SANTOS VALLADOLID, Appel lant

v.

COMMISSIONER OF SOCIAL SECURITY

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ON APPEAL FROM THE UNITED STATES DISTRICT C OURT FOR THE DISTRICT OF NEW JERSEY D.C. Civil No. 97-cv-05919 District Judge: The Honorable John W. Bissell, C hief Judge

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Submitted Under Third Circuit LAR 34.1(a ) February 12, 2002

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Before: MANSMANN, McKEE, and BARRY, Circuit Judges

(Opinion Filed: February 19, 2002 )

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MEMORANDUM OPINION

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BARRY, Circuit Judge On October 25, 2000, appellant filed a motion for attorneys' fees pursuant to the Equal Access to Justice Act ("EAJA"), 28 U.S.C.  2412(d)(1)(A), for counsel's work in appealing the Commissioner's denial of appellant's claim for disability benefits and Supplemental Security Income. On April 23, 2001, t he District Court denied that motion. We have jurisdiction under 28 U.S.C.  1291 and will affirm. The parties are familiar with the facts underl ying this appeal and we will, accordingly, discuss them only as necessary to reso lve the issue presented. This case began more than ten years ago when a ppellant filed a disability claim for alleged mental impairment due to depression. Appel lant lost before the ALJ, lost beforethe Appeals Council, lost before District Court, an d ultimately lost

before us on August 16, 2000. In sum, the District Court determined th at substantial evidence supported the ALJ's finding that appellant was not disabled, and we summarily affirmed. Just before we affirmed, however, the Commissi oner agreed to a remand for further administrative proceedings, an agreement of which we were apprised after our order issued. Accordingly, we entered an order vac ating our August 16, 2000 order and remanding the case to the District Court, which, in turn, remanded the matter to the Commissioner. On remand, new evidence in the form of vocational expert testimony was submitted and appellant prevailed on the merits. A ppellant now seeks $8,646.55 in attorneys' fees "for work performed before the Dist rict Court and the Court of Appeals for the Third Circuit." Appellant's Br. at 10. The EAJA provides, in pertinent part, that a p revailing party shall be awarded "fees and other expenses . . . , unless the court f inds that the position of the United States was substantially justified." 28 U.S.C.  2412(d)(1)(A). The District Court denied appellant's motion for fees particularly in light o f the fact that both that Court and our Court had found that the Commissioner's position wa s supported by substantial evidence. App. 19-21. We review this determination for an ab use of discretion. E.g., Pierce v. Underwood, 487 U.S. 552, 559 (1988); Morgan v. Perr y, 142 F.3d 670, 682 (3d Cir. 1998). A position is "substantially justified" when i t is "justified in substance or in the main that is, justified to a degree that could sati sfy a reasonable person." Pierce, 487 U.S. at 565. In other words, the government's posi tion is substantially justified "if it has a reasonable basis in both law and fact." Morgan, 142 F.3d at 684 (quoting Hanover Potato Prods., Inc. v. Shalala, 989 F.2d 123, 127 ( 3d Cir. 1993)). Within this framework, it is well settled that the government may lose on the merits yet still be found to have been substantiall y justified in its position. Similarly, if the case turns on an unsettled or "close" question of law, the government's position will normally be substantially justified notwithstanding the fact that its legal position is ultimately rejected. Washington v. Heckler, 756 F. 2d 959, 961-62 (3d Cir. 1985). Incontrast, "[w]hen the government's legal position c learly offends

established precedent . . . its position cannot be said to be 'substantially justified.'" Id. at 962. The Commissioner bears the burden of showing t hat his position was substantially justified. Morgan, 142 F.3d at 684. To carry this burden, the Commissioner must show: (1) a reasonable basis in truth for the facts alleg ed; (2) a reasonable basis in law for the theory he propounded; and (3) a reasonable connect ion between the facts alleged and the legal theory advanced. Id. Here, the Commissioner's position was that app ellant was not disabled and that the ALJ's denial of benefits was supported by substanti al evidence. In short, the ALJ concluded that appellant had the residual functiona l capacity to perform work existing in significant numbers in the national economy, and th at no mental impairment existed that would preclude such work. App. 31-32 & 41. In add ressing two medical opinions suggesting that severe depression existed, the ALJ observed that the reports failed to find any specific or significant work-related limitation s, were based on appellant's subjective complaints rather than objective findings, and reve aled that appellant showed signs of "malingering." App. 32-33. In addition, the ALJ f ound appellant's subjective complaints not to be credible, and relied on test results show ing that appellant had normal concentration and memory abilities as evidence cont radicting at least one of the medical reports. App. 34. The Appeals Council concurred. Before the District Court, the Commissioner co ntended that the ALJ's findings regarding the issue of mental impairment were suppo rted by substantial evidence. As the Court put it: "The dispute between claimant and the Commissioner arises in step two [of the five-step sequence in evaluating disability cla ims]. The Commissioner maintains that, despite the two opinions concluding that claimant's depression is severe, it is not." App. 38. The District Court, in a thorough opinion, agr eed, primarily because the doctors who offered those opinions failed to adduce objective e vidence supporting them, which left appellant with insufficient proof at step two of th e five-step sequence. App. 41-49. We affirmed "substantially for the reasons" set forth by the District Court. Valladolid v.Commissioner of Social Security, No. 00-5097, at 2 (3d Cir. Aug. 16,

2000). With this record in mind, we turn to the Commi ssioner's burden of establishing a substantially justified position. First, the facts upon which the position rested -- the statements contained in the doctors' reports, medic al test results, and the ALJ's credibility determinations -- had a reasonable basis in truth. Second, the lack of objective findings in the doctors' reports and the ALJ's credibility dete rminations gave the Commissioner a reasonable basis in law to argue that appellant fai led to carry his burden and that the ALJ's conclusions were supported by substantial evi dence. That we ultimately affirmed lends support to the reasonableness of the Commissi oner's factual and legal conclusions and the connection of one to the other. Accordingl y, we conclude that the District Court did not abuse its discretion in holding that the Co mmissioner carried his burden of demonstrating a substantially justified position. In his attempt to rebut this conclusion, appel lant invokes a litany of wholly speculative contentions as to the reasons for the C ommissioner's agreement to remand, the "delay" in notifying us of that decision, and a n alleged "informal agreement" by or practice of the Commissioner not to challenge fee a pplications after such remands. He argues, as well, that the Commissioner erroneously construed the evidence in rejecting his claim, as evidenced by his ultimate success on the merits. Finally, he argues that the Commissioner's position "clearly offended" establis hed and forthcoming precedent, and that the District Court and this Court "ignored" th is precedent. Only this final argument warrants discussion. Remarkably, appellant exerts a fair amount of energy contending that we ignored Sykes v. Apfel, 228 F.3d 259 (3d Cir. 2000), when w e rejected his claim on the merits in our August 16, 2000 order. We say "remarkably" bec ause Sykes was decided more than a month after we disposed of appellant's claim on t he merits. Appellant acknowledges this fact, yet insists that we ignored Sykes. It g oes without saying that we could hardly have ignored a decision that did not exist and appe llant has not pointed to anything that would have enabled us, the District Court, or (most importantly) the Commissioner toforesee our future holdings. In any event, appella nt's reliance on Sykes

is entirely unpersuasive. Appellant next claims that the District Court and our Court also ignored our prior decisions in Jesurum v. Secretary of the United Sta tes Dep't of Health & Human Servs., 48 F.3d 114 (3d Cir. 1995); Adorno v. Shalala, 40 F .3d 43 (3d Cir. 1994); and Gilliland v. Heckler, 786 F.2d 178 (3d Cir. 1986). Appellant's Br. at 17. Specifically, appellant opines that he "argued before the District Court an d before this Court that the ALJ would not be permitted under Jesurum . . . to utilize the 'framework' of a vocational rule in the presence of non-exertional limitations," but that t his argument "ultimately fell on deaf ears." Appellant's Br. at 17-18 (emphasis added). This argument fails for a number of

reasons. First, none of the above cases compel an ALJ t o use a vocational expert where the claimant has both exertional and nonexertional impa irments, nor do they categorically preclude the ALJ from utilizing the vocational rule s in such cases. Indeed, we observed in Sykes that "[w]e have never defined what sort of evidence the Commissioner must present to meet his burden of proof" in such circum stances. Sykes, 228 F.3d at 273. Second, appellant's cases are factually inapposite because each of the cases involved insufficiently developed factual records or factual findings illustrating what work the claimant could perform in light of uncontradicted m edical evidence that conflicted with the ALJ's findings. Jesurum, 48 F.3d at 118-20; A dorno, 40 F.3d at 46- 47; Gilliland, 786 F.2d at 183-84. Here, in contrast, the ALJ mad e specific and supported factual findings regarding appellant's ability to perform w ork, App. 31, and his finding of no severe mental impairment was supported by the medic al evidence. Finally, even viewing these cases in the light most favorable to appellant, the Commissioner's position can, at worst, be described as a good faith argument on an unresolved or "close" legal question. As such, the Commissioner's position was substantially justified. Washington, 756 F.2d at 9 61-62. We have carefully considered all of appellant' s remaining contentions and find them to be unavailing. We will affirm the April 23, 2001 order of the District Court.TO THE CLERK OF THE COURT:

Kindly file the foregoing Memorandum Opinion.

/s/ Maryanne Trum p Barry Circuit Judge